Northern Exposure

Going down the class-action Tran-Canada Highway

by Kyla Stott-Jess and Mitchell Barnard

The phrase “class action lawsuit” can strike fear in the executive ranks of any large company. The development of class action law in in the employment context has been slower north of the 49th parallel than in the United States. Recently, though, a line of cases has been paving the class action ‘highway’ to increased Canadian litigation in this area. Much of the law to date has focused on certification. For a legal action to be certified, its initiators must prove that it is appropriate for the claims to be brought as a class proceeding. A recent Ontario decision suggests that certification may not provide as much of a speed bump as employers would like.

Paving the class-action highway

The claiming employees in Baroch v Canada Cartage, argued that their federally-regulated employer had breached its overtime obligations under the Canada Labour Code. While these alleged breaches would cause employer headaches in the context of individual employee claims, the allegations in Baroch were even more concerning. The potential claim involved thousands of employees. The action was brought allegedly on behalf of some 7800 current and former employees.

Although the merits of the allegations in the Baroch action remain undetermined (stay tuned!), the case is important in highlighting the court’s willingness to smooth the procedural highwaythe certification requirementfor class action lawsuits in the employment context. The decision is a departure from previous employment-based class action decisions that denied certification, including the 2012 decision in McCracken v. Canadian Railway and the 2014 decision in Brown v. Canadian Imperial Bank of Commerce.

One of the main requirements for certification of a class action is “commonality,” or the presence of a common issue among those in the claim group. This commonality requirement was the pivotal issue in Baroch. Those who initiated the claim argued that commonality should be found in the employer’s systemic and nationwide application of its overtime policy. The employer argued that no commonality could be found, as the action concerned “misclassification” claims like those in McCracken and Brown. In McCracken and Brown, the courts found that the claims involved allegations that employees were ‘misclassified’ as ineligible for overtime. Because the potential claimants in those cases had widely varying jobs and circumstances, individual assessments on their overtime eligibility were needed. Sufficient commonality could not be found.

The motions judge in Baroch rejected the employer’s argument. Rather than framing the overtime allegations as ‘misclassification’ claims, the court focused on the employer’s systemic application of its employment policies. There was thus sufficient commonality, and the speed bump to certification was cleared. The Ontario Superior Court of Justice upheld the decision on appeal, see Baroch v Canada Cartage.

Impact on employers

The certification of the class action in Baroch is relevant for employers across Canada. Although there are differences in provincial class action legislation (most notably in ‘opt-in’ or ‘opt-out’ regimes), the law on certification is similar across Canada. As such, courts across the country will be looking at the commonality arguments in Baroch if similar cases come before them.

This is concerning for employers. Baroch suggests that the uniform application of employment policiesusually a hallmark of good employment practicesmay weigh in favour of class action certification. If an employer’s employment policies run afoul of laws or regulations, the uniform application of these policies creates a substantial liability risk. This is particularly the case if the same legal violation allegedly happened across the whole employee group.

Putting up a road block

Despite the concerns raised by Baroch, it is not recommended that employers revert to an unequal or inconsistent application of employment policies just to avoid the certification potential of a class action lawsuit. Such a strategy would almost certainly backfire by creating other, potentially numerous, employment-based claims.

The better solution is to have legally sound employment policies in place that don’t risk violating overtime regulations. To that end, employers are encouraged to review their employment policies on a regular basis. You should ensure that they meet or exceed the applicable legislative requirements for all of the jurisdictions in which they operate.

Consistent and uniform application of legally sound employment policies remains the goal for all employers. Good employment practices act as a roadblock to employment lawsuits of all makes and models, including class actions.